Using a separate personal account for a limited company

[ndoody]

Is there any reason why you couldn't setup a separate personal bank account for storing all ltd company money/finances/transactions, and run it like a business bank account? Regardless of anything else, how does it sit on a legal point?

[LisaContractorUmbrella]

The bank account will be in the name of your business presumably rather than your name and therefore it would be a business bank account. If you intend to open another account in your name and run it as a business account you will be raising invoices in the name of Your Co Ltd and then paying the money into the account of John Smith 2 (or whatever)? - I could see this getting messy

[malvolio]

The bank will be rather annoyed if they find out. They have different legal obligations between personal and business accounts. There's no justifiable reason to do it either: would you keep your money in someone else's account?

The way to keep off HMRC's radar is not to do anything out of the ordinary and follow all the rules. It's really not that hard to understand.

[d000hg]

The bank will be rather annoyed if they find out. They have different legal obligations between personal and business accounts.

Which are?

I imagine the Ts&Cs for a standard account will simply include a clause "you may not use this account for business purposes" and that's all there is to it.

You can of course do exactly this if you're running as a sole trader but few of us are.

[malvolio]

Which are?

I imagine the Ts&Cs for a standard account will simply include a clause "you may not use this account for business purposes" and that's all there is to it.

You can of course do exactly this if you're running as a sole trader but few of us are.

Which are around reporting and access to records: company accounts are effectively public domain (subject to due process of course), personal ones aren't without a court order or equivalent.

As for "sole traders"... do keep up. They are one person (the clue is in the name), a company is also a legal person which is why you don't mix personal and company money.

[tractor]

...

The OP was specifically asking about a Ltd. The clue is in the OP

And no, you could not do it mainly because of anti money laundering rules which place different obligations on a bank between personal and corporate accounts, not to mention the other obligations people have mentioned.

[Craig at Nixon Williams]

Is there any reason why you couldn't setup a separate personal bank account for storing all ltd company money/finances/transactions, and run it like a business bank account? Regardless of anything else, how does it sit on a legal point?

Cash in a bank account is an asset of the company and therefore should be in a bank belonging to the company, in the company name. Remember that the company is a separate legal entity to you as a person.

If company money was being paid into a personal account then HMRC would see this as being a director’s loan and you would be liable for BIK tax and S455 tax accordingly.

Craig

[ndoody]

Hmm, it's just personal bank accounts seem so much more lucrative if the money is just floating in there.

I've been a limited company since 2007, and always feel the banks stitch you up in fees and offering you nothing that they do to personal accounts. For all intents and purposes, all I have ever dealt has been a sort code and account number when dealing with anyone - as far as the agencies are concerned money goes into a bank account and as far as the hmrc/tax companies are concerned money comes out of a bank account no/sort code.

But I guess stuff is going on in the background that differentiates the accounts as far as HMRC are concerned? So they could tell the difference?

It would be with the idea that the personal bank account acts exactly like the business bank account, I wouldn't take anything out of it to my "other" personal bank account other than what I was legally entitled to.

[DaveB]

Hmm, it's just personal bank accounts seem so much more lucrative if the money is just floating in there.

I've been a limited company since 2007, and always feel the banks stitch you up in fees and offering you nothing that they do to personal accounts. For all intents and purposes, all I have ever dealt has been a sort code and account number when dealing with anyone - as far as the agencies are concerned money goes into a bank account and as far as the hmrc/tax companies are concerned money comes out of a bank account no/sort code.

But I guess stuff is going on in the background that differentiates the accounts as far as HMRC are concerned? So they could tell the difference?

It would be with the idea that the personal bank account acts exactly like the business bank account, I wouldn't take anything out of it to my "other" personal bank account other than what I was legally entitled to.

The agencies should be doing their own checks on the company details when you provide them as they have obligations to conduct such checks. If the company name doesn't match the company account then they should be asking questions.

The bank will see large payments going into the account and monies going out to HMRC VAT accounts and corporation tax accounts and will ask questions and potentially flag you up to HMRC under their own money laundering obligations.

If you every get a VAT or PAYE audit from HMRC they will treat any money paid into a personal account as income and tax you on it accordingly.

If you want your co. to do more with it's cash reserves then get some proper advise and do it as a business.

[northernladuk]

Hmm, it's just personal bank accounts seem so much more lucrative if the money is just floating in there.

I've been a limited company since 2007, and always feel the banks stitch you up in fees and offering you nothing that they do to personal accounts. For all intents and purposes, all I have ever dealt has been a sort code and account number when dealing with anyone - as far as the agencies are concerned money goes into a bank account and as far as the hmrc/tax companies are concerned money comes out of a bank account no/sort code.

But I guess stuff is going on in the background that differentiates the accounts as far as HMRC are concerned? So they could tell the difference?

It would be with the idea that the personal bank account acts exactly like the business bank account, I wouldn't take anything out of it to my "other" personal bank account other than what I was legally entitled to.

The answer is no, don't do it. There is a reason why 1.5 million of us have business accounts and don't do what you are saying. I am sure plenty of people have tried to get around the system unsuccessfully and therefore just follow the normal process. If you want more justification as why not to then speak to your accountant.